Real versus nominal GDPConsider a simple economy that produces two goods: stickers and paper plates. The following table shows the prices and quantities of the goods over a three-year period. YearStickersPaper platesPriceQuantityPriceQuantity(Dollars per sticker)(Number of stickers)(Dollars per paper plate)(Number of paper plates)202032602160202141202220202231552140 Use the information from the preceding table to fill in the following table. YearNominal GDPReal GDPGDP Deflator(Dollars)(Base year 2020, dollars)2020 2021 2022 From 2021 to 2022, nominal GDP DECREASED OR INCREASED , and real GDP INCREASED OR DECREASED.The inflation rate in 2022 was -13% or -.01% or 13% or 87% or 115%.Why is real GDP a more accurate measure of an economy's production than nominal GDP? a. Real GDP is not influenced by price changes, but nominal GDP is. b. Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes. c. Real GDP includes the value of exports, but nominal GDP does not.

Answered: Real versus nominal GDP Consider a…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Real versus nominal GDP

Consider a simple economy that produces two goods: stickers and paper plates. The following table shows the prices and quantities of the goods over a three-year period.

Year	Stickers	Paper plates
Price	Quantity	Price	Quantity
(Dollars per sticker)	(Number of stickers)	(Dollars per paper plate)	(Number of paper plates)
2020	3	260	2	160
2021	4	120	2	220
2022	3	155	2	140

Use the information from the preceding table to fill in the following table.

Year	Nominal GDP	Real GDP	GDP Deflator
(Dollars)	(Base year 2020, dollars)
2020
2021
2022

From 2021 to 2022, nominal GDP DECREASED OR INCREASED , and real GDP INCREASED OR DECREASED.

The inflation rate in 2022 was -13% or -.01% or 13% or 87% or 115%.

Why is real GDP a more accurate measure of an economy's production than nominal GDP?

a. Real GDP is not influenced by price changes, but nominal GDP is.

b. Real GDP measures the value of the goods and services an economy produces, but nominal GDP measures the value of the goods and services an economy consumes.

c. Real GDP includes the value of exports, but nominal GDP does not.

Expert Solution

Step 1

The market value of the products and services produced during a given period is known as the nominal gross domestic product. The real GDP is determined for a given time and adjusted according to the price level. It represents the adjusted market value of the products and services.

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